COMMENT: Could China’s ferro-chrome futures be a game-changer? – by Jon Stibbs and Siyi Liu (Metal Bulletin – March 23, 2021)

The Shanghai Futures Exchange’s plans to list ferro-chrome futures, potentially this year, will bring welcomed hedging opportunities and may weaken the dominance of China’s stainless steel mills in the ore and alloy markets, participants told Fastmarkets.

While no definite date or specifications of the ferro-chrome futures have been announced, Fastmarkets asked participants what changes these contracts might bring to their businesses and if they could be a game-changer in the traditional pricing mechanism for the chrome ore and ferro-chrome markets.

Indeed, many ferro-chrome producer sources in China hold positive expectations because these financial derivatives would provide hedging opportunities to better control their production costs, especially in purchasing seaborne chrome ore.

“Smelters tend to accept high-priced seaborne chrome ore when they are bullish about the alloy market. But it sometimes happens that when chrome ore arrives in one or two months’ time, alloy prices have already fallen sharply.

The expensive raw material costs and lower alloy prices therefore can cause us severe losses,” a ferro-chrome producer source said.

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